Pull up a Yahoo Finance chart on Bed Bath & Beyond stick for August and you’d think the company has invented a rival to the Apple iPhone.
Shares of the retailer — which is on the brink of potential financial chaos —have exploded 314% so far in August as retail investors rally around the meme stock. Bed Bath & Beyond stock skyrocketed by nearly 70% in intraday trading on Tuesday amid a massive short squeeze.
BBBY stock finished the session up 29% in a volatile session, and the stock was up another 24% in pre-market trading on Wednesday at the time of publication.
The insane gains for Bed Bath & Bath & Beyond appears to have been triggered by a few red meat items for the enthusiastic meme community, led by redditors on the r/wallstreetbets message board.
First, GameStop Chairman Ryan Cohen purchased out of the money call options on 1.6 million shares of Bed bath with strike prices between $60 and $80, according to a new regulatory filing released Monday. In other words, Cohen — who attacked Bed Bath & Beyond earlier this year — is betting the stock will break through $60 and he will make a ton of money.
Second, the meme community is once again rallying together to counter institutional forces that hold opposing views on the stock and the underlying business.
On Monday, Yahoo Finance reported on signs of financial stress at Bed Bath & Beyond locations in New York — and received from feedback from BBBY fans. On Tuesday, B Riley slashed its rating to Sell on Bed Bath & Beyond, citing bewildering valuation on the stock.
And backing from redditors aside, all is not well fundamentally at Bed Bath & Beyond — the retailer is clearly not working on anything close to an iPhone killer.
After a failed push in 2021 and most of 2022 into stocking stores with private label goods no one had heard of while also closing stores and firing workers, Bed Bath & Beyond ended its most recent quarter with a little more than $100 million in cash, tanking sales, weak store traffic, and a badly damaged brand.
There is currently an interim CEO running the business, which came about after the booting of former top Target exec Mark Tritton, and some observers are wondering whether vendors will continue to ship all of the merchandise that Bed Bath & Beyond needs for the holiday season amid the retailer’s severely weakened financial state.
Most analysts on Wall Street — the few remaining that still cover the super volatile stock — agree the company will soon be forced to raise cash in some way to survive.
“Given our ongoing view of continued share of wallet normalization and housing deterioration, the board faces a difficult environment to stabilize the business and cash burn given Bed Bath & Beyond has been losing share for a long time,” JP Morgan analyst Christopher Horvers, who dropped his price target on Bed Bath & Beyond’s stock given its uncertain future, recently wrote in a note to clients. “We also note the category has turned materially more promotional and demand now also slowing at the higher-end of the market.”